Filed pursuant to
Rule 424(b)(3)
Registration
Nos. 33-60916 and
333-08381
458,334 COMMON SHARES
GLASGAL COMMUNICATIONS, INC.
Common Stock (par value $.001 per share)
This Prospectus relates to the reoffer and resale of shares (the
"Shares") of the Common Stock, $.001 par value (the "Common Stock"), of Glasgal
Communications, Inc. (the "Company") underlying options which have been granted
to "affiliates" (the "Selling Shareholders") of the Company as defined in Rule
405 of the Securities Act of 1933, as amended (the "Securities Act") under the
Company's 1990 Stock Option Plan, as amended (the "1990 Plan"). If and when
further options are granted to affiliates of the Company under the 1990 Plan,
the Company intends to distribute a Prospectus Supplement as required by Rule
424(b) of the Securities Act. Such Prospectus Supplement will specify the names
of the Selling Shareholders and the amount of Shares to be reoffered and resold.
The offer and sale of the Shares to the Selling Shareholders were
previously registered under the Securities Act. The Shares are being reoffered
and resold for the account of the Selling Shareholders and the Selling
Shareholders and the Company will not receive any of the proceeds from the
resale of the Shares.
The Selling Shareholders have advised the Company that the resale of
their Shares may be effected from time to time in one or more transactions on
the Boston Stock Exchange, the Nasdaq Small-Cap Market, in negotiated
transactions or otherwise at market prices prevailing at the time of the sale or
at prices otherwise negotiated. See "Plan of Distribution." The Company will
bear all expenses in connection with the preparation of this Prospectus.
The Common Stock of the Company is traded on the Nasdaq Small-Cap
Market ("Nasdaq") under the symbol "GLAS." On October 10, 1997, the closing bid
price for the Common Stock on Nasdaq was $8.375.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 13, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; Northwestern Atrium Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661; and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov. In addition, reports, proxy statements and
other information concerning the Company (symbol: GLAS) can be inspected and
copied at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006, on which the Common Stock of the Company is listed.
The Company has also filed with the Commission a Registration Statement
on Form S-8 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Shares
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement.
TABLE OF CONTENTS
AVAILABLE INFORMATION................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 3
RISK FACTORS.......................................................... 4
GENERAL INFORMATION................................................... 7
USE OF PROCEEDS....................................................... 7
SELLING SHAREHOLDERS.................................................. 8
PLAN OF DISTRIBUTION.................................................. 8
LEGAL MATTERS......................................................... 8
EXPERTS............................................................... 8
ADDITIONAL INFORMATION................................................ 9
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended April 30,
1997, the Company's Quarterly Report on Form 10-Q for the quarter ended July 31,
1997 and the Company's Current Report on Form 8-K dated September 23, 1997 are
incorporated by reference in this Prospectus and shall be deemed to be a part
hereof. All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of this
offering, are deemed to be incorporated by reference in this Prospectus and
shall be deemed to be a part hereof from the date of filing of such documents.
The Company's Application for Registration of its Common Stock under
Section 12(b) of the Exchange Act filed on May 2, 1996 is incorporated by
reference in this Prospectus and shall be deemed to be a part hereof.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents. Written requests for such copies should
be directed to 20C Commerce Way, Totowa, New Jersey 07004, Attention: James M.
Caci. Oral requests should be directed to such officer (telephone number (201)
890-4800).
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Selling Shareholder. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, the securities offered
hereby to any person in any state or other jurisdiction in which such offer or
solicitation is unlawful. The delivery of this Prospectus at any time does not
imply that information contained herein is correct as of any time subsequent to
its date.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. EACH
PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN, AND AFFECTING THE BUSINESS OF, THE COMPANY BEFORE MAKING AN
INVESTMENT DECISION.
WORKING CAPITAL DEFICIENCIES; HISTORY OF LOSSES. The Company has a
history of limited working capital and has had working capital deficiencies of
$585,000, $7,664,000 and $2,957,000 for the fiscal years ended April 30, 1995,
1996 and 1997, respectively and a working capital deficiency of $248,000 as of
July 31, 1997. In addition, while the Company had net income of $25,000 for the
three months ended July 31, 1997, the Company has incurred net losses of
$2,393,000, $13,418,000 and $4,960,000 for the fiscal years ended April 30,
1995, 1996, and 1997.
There can be no assurance that the Company will generate sufficient
revenues to meet expenses or to operate profitably in the future. If the Company
is unable to generate sufficient cash flow from its operations it would have to
seek additional borrowings, effect debt or equity offerings or otherwise raise
capital. There can be no assurance that any such financing will be available to
the Company, or if available, that the terms will be acceptable to the Company.
In addition, the ability to raise other capital might be restricted by financial
covenants contained in currently existing borrowing agreements.
POSSIBLE NEED FOR ADDITIONAL FINANCING. As of July 31, 1997 the Company
had cash and cash equivalents of $759,000. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations that its
existing capital resources will be sufficient to satisfy its anticipated cash
requirements for at least 12 months. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate, the Company will be
required to seek additional financing to finance its working capital
requirements. There can be no assurance that any additional financing, if
required, will be available to the Company on acceptable terms, if at all. The
Company does not currently have availability under its line of credit. Any
inability by the Company to obtain additional financing, if required, will have
a material adverse effect on the operations of the Company.
SUBSTANTIAL INDEBTEDNESS. As of July 31, 1997, the Company had
outstanding on a consolidated basis approximately $14,779,000 of indebtedness.
The level of the Company's indebtedness could have important consequences to its
future prospects, including the following: (i) limiting the ability of the
Company to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes; (ii)
requiring that a substantial portion of the Company's cash flow from operations,
if any, be dedicated to the payment of principal of and interest on its
indebtedness and other obligations; (iii) limiting its flexibility in planning
for, or reacting to changes in, its business; (iv) the Company will be more
highly leveraged than some of its competitors, which may place it at a
competitive disadvantage; and (v) increasing its vulnerability in the event of a
downturn in its business.
DEPENDENCE ON KEY PERSONNEL. The Company's future success depends in
large part on the continued service of its key personnel. In particular, the
loss of the services of Isaac Gaon, Chief Executive Officer, Robert Gadd, Vice
President, or Christopher Carey, President and Chief Executive Officer of
Datatec Industries Inc. ("Datatec"), could have a material adverse effect on the
operations of the Company. The Company has employment agreements with Messrs.
Gaon, Gadd and Carey which each expire on October 31, 1999. Each of these
employment agreements may be terminated by the Company for cause or by the
employee for good reason. The Company's future success and growth also depends
on its ability to continue to attract, motivate and retain highly qualified
employees, including those with the technical expertise necessary to operate the
business of the Company. There can
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be no assurance that the Company will be able to attract, motivate and retain
such persons.
COMPETITION. The Company competes with other companies involved in the
design, installation, integration, deployment and servicing of local and wide
area networks. These competitors include local and national systems integrators
some of which are substantially larger and have significantly greater resources
than the Company. These markets are highly competitive and there can be no
assurance that the Company will be able to compete successfully in the future.
CONTROL BY PRINCIPAL STOCKHOLDERS. Ralph Glasgal, the Chairman of the
Board and President of the Company, through his beneficial ownership and through
a voting agreement with Direct Connect International Inc. ("DCI") has the power
to vote approximately 19% of the Common Stock. DCI has pledged approximately
300,000 of the shares of Common Stock it owns in the Company as collateral for
various obligations. If the pledgee were to become the owner of such shares, Mr.
Glasgal would no longer have the power to vote such shares. In addition, Mr.
Carey, President and Chief Executive Officer of Datatec has the power to vote
approximately 14% of the Common Stock.
EXTENDED LEAD TIMES FOR REALIZATION OF REVENUE. Due to the nature and
size of orders that the Company is now pursuing there is a longer lead time
between the initiation of prospective business and the consummation of a
transaction, if any. Consequently, significantly more resources are required to
manage this process. As such, there is likely to be substantial fluctuations in
sales volume on a month-to-month and quarter-to-quarter basis. The pursuit of
this type of business increases the Company's risk of failure, especially given
its present level of working capital. As a result, if the Company experiences
lower than expected sales volume for an extended period of time, there will be a
material adverse effect on the Company.
VOLATILITY OF THE COMPANY'S COMMON STOCK PRICES. The market price of
the Company's Common Stock has experienced significant volatility, with per
share closing bid prices ranging from a low of $2.75 to a high of $11.63 over
the period from May 1, 1996 to July 31, 1997. Announcements of technological
innovations for new commercial products of the Company or its competitors,
developments concerning propriety rights or governmental regulation or general
conditions in the market for the Company's services may have a significant
effect on the Company's business and on the market price of the Company's
securities. Sales of a substantial number of shares by existing security holders
could also have an adverse effect on the market price of the Company's
securities.
SHARES ELIGIBLE FOR FUTURE SALE. The sale, or availability for sale, of
substantial amounts of Common Stock in the public market pursuant to Rule 144 or
otherwise could adversely affect the market price of the Common Stock and could
impair the Company's ability to raise additional capital through the sale of its
equity securities.
The shares of Common Stock issuable upon exercise of the warrants or
conversion of the Notes or the Common Stock registered in the Registration
Statement of which this Prospectus is part will be freely tradeable without
restriction under the Securities Act upon resale by the Selling Stockholders.
The Selling Stockholders are not restricted as to the price or prices at which
they may sell their Shares. Sales of such Shares may have an adverse effect on
the market price of the Common Stock. Moreover, the Selling Stockholders are not
restricted as to the number of Shares that may be sold at any time, and it is
possible that a significant number of Shares could be sold at the same time
which may also have an adverse effect on the market price of the Company's
Common Stock.
NO CASH DIVIDENDS. The Company has not paid cash dividends on its
Common Stock since its inception, other than certain distributions made to
stockholders
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in amounts sufficient to reimburse the Company's stockholders for income tax
liabilities arising from the Company's former status as an "S" corporation. The
Company currently intends to retain earnings, if any, for use in the business
and does not anticipate paying any dividends to its stockholders in the
foreseeable future.
RIGHTS OF COMMON STOCK SUBORDINATE TO PREFERRED STOCK. The Certificate
of Incorporation of the Company authorizes the issuance of a maximum of
4,000,000 shares of preferred stock, par value $.001 per share. There are no
shares of preferred shares currently issued and outstanding, however, if shares
of preferred stock are issued in the future, the terms of a series of preferred
stock may be set by the Company's Board of Directors without approval by the
holders of the Common Stock of the Company. Such terms could include, among
others, preferences as to dividends and distributions on liquidation as well as
separate class voting rights. The rights of the holders of the Company's Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future.
CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS. The future issuance of
preferred stock by the Company could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company does not
have any present plans to issue any shares of preferred stock.
ACQUISITIONS. It is currently anticipated that a portion of the
Company's future growth will result from acquisitions of other similar or
complementary businesses. In October 1994, the Company consummated the
acquisition of Signatel, Ltd. ("Signatel"). On April 24, 1996, the Company
acquired 80% of the issued and outstanding capital stock of Computer-Aided
Software Integration, Inc. ("CASI"), a provider of software tools and services
to systems integrators and independent software vendors. On July 31, 1996, the
Company acquired 100% of the issued and outstanding capital stock of HH
Communications, Inc. ("HH"), which resells computer networking equipment and
provides value-added services in connection with such equipment. On October 31,
1996, the Company acquired approximately 98.5% of the issued and outstanding
capital stock of Datatec, a network integrator. The Company acquired the
remaining 1.5% of the outstanding capital stock of Datatec pursuant to a Stock
Purchase Agreement dated August 27, 1997. The Company has no other current plan
or agreement to acquire any other business. There can be no assurance that any
other transaction will be consummated or that they will result in increased
levels of profit for the Company. In addition, there can be no assurance that
the Company will be able to integrate or manage successfully other acquired
businesses.
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GENERAL INFORMATION
As used in this Prospectus, the term "Company" refers collectively to
Glasgal Communications, Inc., a Delaware corporation and its subsidiaries (i)
Signatel, a wholly owned subsidiary of the Company, (ii) CASI, a subsidiary of
which the Company owns 80% of the issued and outstanding shares, (iii) HH, a
wholly owned subsidiary of the Company, and (iv) Datatec, a wholly owned
subsidiary of the Company.
The Company provides configuration, integration and rapid deployment
services for the implementation of complex computer networking and connectivity
systems. By combining its standardized process methodology and its Integrator's
Workbench software tools with extensive project management, integration and
implementation expertise, the Company efficiently delivers high quality and cost
effective technology deployment solutions. Utilizing four regional staging and
configuration centers and a field deployment force operating out of 20 offices,
the Company conducts multiple simultaneous large scale implementations for
organizations throughout North America. In addition, the Company believes its
consistent, rapid implementation process model enhances the value of customer
technology investment and enables organizations to accelerate the assimilation
of these technologies.
Over the past four years the Company has been reducing its dependence
on hardware distribution as a result of the continuous margin erosion and the
high working capital needs of this business. In June 1997, management of the
Company with the consent of the Board, agreed to discontinue its business as a
distributer of data communications equipment in order to concentrate the
Company's efforts on integration, configuration and deployment services.
The Company's executive offices are located at 20C Commerce Way,
Totowa, New Jersey 07512. The telephone number of the Company is (201) 890-4800.
The Shares offered hereby were or will be purchased by the Selling
Shareholders upon exercise of options granted to them and will be sold for the
account of the Selling Shareholders.
USE OF PROCEEDS
The Company will receive the exercise price of the options when
exercised by the holders thereof. Such proceeds will be used for working capital
purposes by the Company. The Company will not receive any of the proceeds from
the reoffer and resale of the Shares by the Selling Shareholders.
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SELLING SHAREHOLDERS
This Prospectus relates to the reoffer and resale of Shares issued or
that may be issued to the Selling Shareholders upon the exercise of outstanding
stock options under the Plans and Option Agreements.
The following table sets forth (i) the number of shares of Common Stock
owned by each Selling Shareholder at September 30, 1997, (ii) the number of
Shares to be offered for resale by each Selling Shareholder and (iii) the number
and percentage of shares of Common Stock to be held by each Selling Shareholder
after completion of the offering.
<TABLE>
<CAPTION>
Number of shares of
Common Stock/
Number of Percentage of Class to
Number of shares of Shares to be be Owned After
Common Stock Owned at Offered for Completion of the
Name September 30, 1997 Resale Offering
- ---------------------------------------- ------------------------ ----------------- ------------------------
<S> <C> <C> <C>
Isaac J. Gaon(1)........................... 947,336(2) 198,821 748,515/3.0%
Robert F. Gadd(3).......................... 479,566(4) 163,985 315,581/*
James M. Caci(5) ........................ 228,667(6) 95,528 133,139/1.2%
</TABLE>
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* Less than 1%.
(1) Mr. Gaon is Chief Executive Officer and a Director of the Company.
(2) Mr. Gaon's beneficial ownership includes options to purchase 944,336
additional shares of Common Stock which are exercisable within 60 days of
September 30, 1997.
(3) Mr. Gadd is a Senior Vice-President and Chief Technology Officer of the
Company.
(4) Mr. Gadd's beneficial ownership includes options to purchase 479,566 shares
of Common Stock which are exercisable within 60 days of September 30, 1997.
(5) Mr. Caci is a Vice President-Finance, Chief Financial Officer and Secretary
of the Company.
(6) Mr. Caci's beneficial ownership includes options to purchase 228,667 shares
of Common Stock which are exercisable within 60 days of September 30, 1997.
PLAN OF DISTRIBUTION
It is anticipated that all of the Shares will be offered by the Selling
Shareholders from time to time in the open market, either directly or through
brokers or agents, or in privately negotiated transactions. The Selling
Shareholders have advised the Company that they are not parties to any
agreement, arrangement or understanding as to such sales.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Shares
offered hereby have been passed upon for the Company by Messrs. Olshan Grundman
Frome & Rosenzweig LLP, 505 Park Avenue, New York, New York 10022. Certain
members of such firm hold Common Stock and options to purchase Common Stock of
the Company.
EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-8 under the Securities Act with respect to the
Shares offered hereby. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
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